Irish investments worth more than €220 million held through contracts for difference (CFDs) have been liquidated by broker Cantor Fitzgerald in the past month.

The value of contracts held in Irish equities by the US broker - one of the largest providers of CFDs in the Irish market - tumbled by almost 25 per cent in just one month.

The move will have left a significant number of Irish investors supporting major losses.

With the Iseq nursing losses of 8 per cent in the first half of August alone, Cantor Fitzgerald tightened rules on CFDs. Investors were told they would have to double the "margin" (or upfront deposit) that they put down for their CFD holdings to 20 per cent of the value of the contracts from 10 per cent previously.

The move during the peak holiday season caught many unawares. Those who missed the deadline for increasing the cash margin on their accounts had their positions sold.

Turbulent market conditions had already seen a number of clients face "margin calls" - obliging them to top up their CFD account to offset adverse price movements on the underlying shares.

CFDs are reported to account for more than a third of equity business conducted of the Irish Stock Exchange, with Cantor Fitzgerald accounting for a large proportion of the trade.

Only a handful of Irish companies have seen Cantor Fitzgerald clients increase their holdings in recent months.

While the number of shares held through CFDs by Cantor in building materials groups Kingspan and Grafton fell by nearly half last month, there was an 18 per cent rise in the number of CRH stock held.

Similarly, business in Aer Lingus has risen, though not on the scale of the positions sold in Ryanair, where Cantor CFDs now account for 29 million shares compared to 49 million at the start of August.

The August sell-off saw Cantor close all positions on drinks group C&C and food company Greencore, both of which were also heavily sold in July. C&C has suffered successive profit warnings as adverse summer weather hit cider sales.

Cantor holdings of Irish equities in CFDs now stands at about €680 million, down from almost €1.1 billion at the start of August.

Industry sources last night said that despite the sell-off, the Irish market still appears to be highly leveraged, especially once the CFD holdings of other brokers such as IG Markets are taken into account.

"It also leaves the local market vulnerable if there is another downturn given that many of the positions must be near margin call requirements given the Irish market performance so far this year."

As of last night, the Iseq was trading 11.6 per cent weaker than at the end of 2006, following a fresh 2.3 per cent slide yesterday - a decline that has seen the Irish market underperform its global peers. For the last few years, the Iseq has consistently been one of the strongest markets globally, a factor that has encouraged business in CFDs.

CONTRACTS FOR DIFFERENCE: how they work

A contract for difference (or CFD) is a derivative product that allows an investor to speculate on movements in share prices without having to own the actual shares.

CFDs can be either "long" (where the investor anticipates the underlying share price will rise) or "short" (where the punter bets on a fall in the price).

In general, CFDs are taken out for amounts of €10,000 upwards.

Purchasers of CFDs will only pay a fraction of the face price of the deal up front as a deposit or "margin" - most brokers require between 10 and

20 per cent of the value of the transaction.

They also pay commission although this tends to be charged at lower rates than commission on conventional trades.

Gains are subject to capital gains tax.

The nature of margin trades means that gains are magnified - because you receive the gain on the full value of the contract, not just of the margin.

However, losses are similarly magnified. If you have bet on a share price gain and the stock suffers a sudden fall in price, your broker may require you to lodge additional money against the contract.

A delay in doing so can see your account sold before prices have a chance to recover leaving you with the bill for the resultant losses.